Posted on: 17/08/2018
Ofgem recently confirmed that the Feed-in-Tariff will close in April 2019, moving the UK even closer to a subsidy-free future. Rob Luke, Head of Origination explores the role that Corporate PPA’s will play in supporting future new renewable generation.
The feed-in-tariff (FiT) has been instrumental to the installation of new small scale renewable generators, providing approximately 6,015MW capacity over the eight years, since the scheme started.
The announcement that the FiT scheme will be closing to new entrants in April 2019 does not come as a shock to the industry, but it does leave a gap to be filled in the future.
Closing the gap
As a next generation energy company, SmartestEnergy have been monitoring the independent renewable generation industry since 2013. In our most recent ‘Energy Entrepreneurs Report 2018’ we highlight a notable slowdown in UK independent renewable generation over the last 18 months.
The Contracts for Difference (CfD) scheme remains the only subsidy available for new generators and this still doesn’t provide a route to market for most onshore wind and solar generators.
However, the recent strength in UK power prices has seen SmartestEnergy conclude a small number of Merchant PPA’s for new build generation projects, but this will not be enough to meet the UK Government targets to decarbonise by at least 80% by 2050.
One of the main solutions I believe will help meet these targets and fill the gap left by the FiT Scheme is the Corporate PPA , which develops a long term partnership between the generator and investment grade energy consumer.
Large industries leading the way
From a global perspective, last year saw a significant boost in renewable generation, with large companies creating direct agreements resulting in 5.4GW of new capacity in 2017.
2018 is continuing that trend, the most notable of these deals was Facebook’s Corporate PPA with three new Norwegian wind farms, that once built in 2019 will provide 294MW of renewable power.
However, there remains some work to be done to overcome the challenges that face UK businesses when deciding to structure a Corporate PPA.
Complex issues such as long term price security, fears around imbalance, contract duration and portability were all debated at the joint SmartestEnergy EDIE roundtable event last month, its focus to work out how these challenges may become opportunities.
The conclusions have helped shape our Corporate PPA, a framework that contains the necessary flexibility to accommodate the funding, pricing and sustainability requirements of investors, generators and consumers.
As more companies continue to set sustainability goals at board level, We also see the future in replicating such deals on a much smaller scale i.e. smaller businesses looking to have a similar agreement with smaller generators, especially those located in close proximity to them.
If you want to explore our Corporate PPA further or identify a solution that works for you in the post subsidy-free world, you can read more via our latest guide – ‘Choosing the right PPA for your project’ or contact me on 07523 505174.
About the author
Robert joined SmartestEnergy in 2017 and is responsible for the development and delivery of bespoke Power Purchase Agreements (PPA).
With almost two decades of experience in the energy sector, he has significant expertise in originating and closing long term, bank financed agreements. Robert was previously with Total Gas & Power where he spearheaded the building of its UK-based renewable energy portfolio, and also held a number of senior positions in both I&C retail and procurement. He holds a BA (Hons) in Economics and Public Policy from Leeds Metropolitan University.